Taking credit

May 09, 2008|From the Seattle TimeS

The Federal Reserve Board has a bead on credit-card industry practices that blindside consumers already strapped by job losses, high medical bills and mortgage troubles. Consumers are being hit hard enough to offend the sensibilities of a conservative Republican presidential administration that through two terms has been loath to use the regulatory powers of government. Until now. "The proposed rules are intended to establish a new baseline for fairness in how credit-card plans operate," Federal Reserve Chairman Ben Bernanke said. He wants consumers to be able to predict how card use and borrowing will affect their costs. A hard look by regulators is long overdue. Lenders -- banks, credit unions and savings-and-loans -- pretty well got what they wanted in 2005 when bankruptcy rules were tightened. The collapse of the housing market because of the lack of disclosure and just plain fraud by mortgage bankers has brought other lending practices into the sunlight. The credit-card industry relentlessly trolls for new customers with unsolicited offers and come-ons. Lurking in the background is a thicket of fees, billing procedures, surcharges and penalties for a myriad of infractions. The Fed wants consumers to have a fair time to make payments instead of being jammed with tight due dates. Payments that arrive by 5 p.m. on the due date, or on a holiday, cannot be considered late. Who knew they were? Banks are infamous, according to the Fed, for playing lucrative games with interest rates. New, higher rates get applied to existing balances. Payments are parsed out so the most expensive debt with the highest interest rate is paid last. Credit-card lenders rode high for years. They got greedy and they got caught. If the Federal Reserve Board is not lobbied into paralysis, the new credit-card rules could be in place by Jan. 1.